Fork in the road

Ivor_Problemo

I have a dilemma I'd like to get some knowledgeable thoughts on. It's a development from my previous thread.

I have unsecured debt, circa £50K, and had to leave employment due to ill health. My monthly income is therefore around £600, as I am currently on ill health benefits. It's reasonably likely that I will be unable to work again.

I own a property with around £60K capital, the mortgage repayment is around £400, and monthly outgoings (apart from unsecured repayments) are around £1K (mortgage included).

I suppose it's a little unusual for this board, fortunately I have a meaningful emergency fund, perhaps £20K. So currently managing, but a DMP seems somewhat inevitable at some point. All of my debt is 0%, and my (albeit slowly diminishing) EF is attracting interest.

This is possibly coming to a head earlier than I'd anticipated, as I have a cc with the bank my salary originally went into. Also have a £1.5K OD facility (unused). Possibly as the income has reduced (possibly coincidental), I've been asked to confirm my employment status and salary by the end of the year.

The cc debt is £8K, paying 1% pcm (so £80ish), with a deal that lasts until 2027.

If I declare the change to my status/income, I feel like the bank may call in the cc balance (or remove my promo rate). This could then lead to an (unwanted) snowball at this time of year! With my other creditors following suit.

Sorry for the ramble, I guess this question is in two parts. Should I pay off the cc (crunching my EF in the process ) and switch away from the bank, or consider triggering a dmp early (using the typical steps of stopping comms/payments and awaiting defaults). What's the best guess that the approach the bank will take if I update my status and drastic change in income?

I suppose there is a third element to the overall query, is a dmp the most suitable debt management solution at all, either now or in the future (if my health doesn't improve), since my income doesn't meet my basic priority debts and outgoings. 

Thanks  

fatbelly

It's normally a good thing that your debts (apart from the mortgage) are at 0%.

But I can't see how you can afford the mortgage, plus household expenses, plus the contractual payments to the nonpriority debts, on £600 per month.

If you are on UC there is some help with the mortgage It's not ideal but should be enough to prevent you from losing the property.

https://www.gov.uk/support-for-mortgage-interest/eligibility

You can't get UC with more than 16k of savings.

Ivor_Problemo

fatbelly said:

It's normally a good thing that your debts (apart from the mortgage) are at 0%.

But I can't see how you can afford the mortgage, plus household expenses, plus the contractual payments to the nonpriority debts, on £600 per month.

If you are on UC there is some help with the mortgage It's not ideal but should be enough to prevent you from losing the property.

https://www.gov.uk/support-for-mortgage-interest/eligibility

You can't get UC with more than 16k of savings.

Thanks fatbelly.

Yes the EF is slowly eroding. 

I am currently on contributions based support (ESA), but that is time limited. This is outside of UC. As you indicate, I don't qualify for UC. Arguably I am just delaying the inevitable currently, but I'm not under any financial pressure in the short term. I have just reduced spending to the bare bones. 

Eventually I will run out of road with 0% deals anyway. So I'm contemplating if this request from the bank will effectively pull things forward. I thought a DMP was going to be inevitable, but only once my 0% deals had ran out. I have access to at least another £40K of unsecured credit (credit cards with no balances), but all would be standard interest, which I am averse to.

I will have access to pensions in a few years. So I was hoping to delay debt management for as long as possible, as close to pension access as I could get. 

In regard to benefits, I will look into UC once I qualify. I am currently waiting for the DWP to determine which group they feel I should be placed in. This might not happen until 2026, I suspect. 

Brie

If you've left your employment due to ill health is an ill health work pension possible?  Something to check out if you haven't already - and it's a slow process but might be worth a bit of effort to at least ask some questions.

And to answer your questions....

Should I pay off the cc (crunching my EF in the process  ) and switch away from the bank NO it's too early for that in my opinion.  If anything you should stop paying completely but see my comment below.

or consider triggering a dmp early (using the typical steps of stopping comms/payments and awaiting defaults). Likely a DMP will be the "solution" but you need to look at mortgage interest assistance in the meantime.  Also consider setting up a new account somewhere not related to any debts, just in case you need it.

What's the best guess that the approach the bank will take if I update my status and drastic change in income? Likely the bank (Barclays by chance? they have form) may close your card or at least drastically reduce your credit limit.  You should be allowed to continue payments (but you can't really afford them) so take that as the option when talking to them and then see what your next step needs to be.  (after 25 years Barclaycard dropped my limit from £16k to under £2k on affordability, funny thing I was a Barclays employee at the time)

I suppose there is a third element to the overall query, is a dmp the most suitable debt management solution at all, either now or in the future (if my health doesn't improve), since my income doesn't meet my basic priority debts and outgoings. Good to know that you recognise priority debts, many don't.  So you need to consider what you will do long term if income can't be increased and your priority bills aren't going to be covered at some point.  I would suggest you use your EF to tick along with mortgage, council tax and talk to your utility provider(s) & water company about putting you on a social tariff which might make things more affordable.  You might be able to get a discount on your council tax too but perhaps not until you are able to get UC, if things go that way.  Have you thought about downsizing, selling your home and renting as more solutions might be possible that way.  Have a read of this Debt solutions - what is your best option?

AND Have you applied for PIP?  Assuming you tick the boxes this might be a big help to keep the priority things.  Nice thing is that it is not income related so should you go back to work, or get benefits this wouldn't be effected. 

Hope you're wrong about not being able to return to work.  But whatever happens I'm glad you're being proactive about finding a good way forward on this. 

Ivor_Problemo

Brie said:

If you've left your employment due to ill health is an ill health work pension possible?  Something to check out if you haven't already - and it's a slow process but might be worth a bit of effort to at least ask some questions.

And to answer your questions....

Should I pay off the cc (crunching my EF in the process  ) and switch away from the bank NO it's too early for that in my opinion.  If anything you should stop paying completely but see my comment below.

or consider triggering a dmp early (using the typical steps of stopping comms/payments and awaiting defaults). Likely a DMP will be the "solution" but you need to look at mortgage interest assistance in the meantime.  Also consider setting up a new account somewhere not related to any debts, just in case you need it.

What's the best guess that the approach the bank will take if I update my status and drastic change in income? Likely the bank (Barclays by chance? they have form) may close your card or at least drastically reduce your credit limit.  You should be allowed to continue payments (but you can't really afford them) so take that as the option when talking to them and then see what your next step needs to be.  (after 25 years Barclaycard dropped my limit from £16k to under £2k on affordability, funny thing I was a Barclays employee at the time)

I suppose there is a third element to the overall query, is a dmp the most suitable debt management solution at all, either now or in the future (if my health doesn't improve), since my income doesn't meet my basic priority debts and outgoings. Good to know that you recognise priority debts, many don't.  So you need to consider what you will do long term if income can't be increased and your priority bills aren't going to be covered at some point.  I would suggest you use your EF to tick along with mortgage, council tax and talk to your utility provider(s) & water company about putting you on a social tariff which might make things more affordable.  You might be able to get a discount on your council tax too but perhaps not until you are able to get UC, if things go that way.  Have you thought about downsizing, selling your home and renting as more solutions might be possible that way.  Have a read of this Debt solutions - what is your best option?

AND Have you applied for PIP?  Assuming you tick the boxes this might be a big help to keep the priority things.  Nice thing is that it is not income related so should you go back to work, or get benefits this wouldn't be effected. 

Hope you're wrong about not being able to return to work.  But whatever happens I'm glad you're being proactive about finding a good way forward on this. 

Thanks Brie!

It's not BC, I do have credit with them at 0% though.

I have looked at social tariffs etc, and CT discount. They all seem to depend upon UC, definitely my council requires applicants to be on UC. It seems to me it's a bit like housing, you have to wait until you're actually evicted to get help! As I currently have material savings, there's not a lot of help available, at least paying income tax and NI for 30+ years qualifies me for a year of modest contributions based support  

One good thing with my mortgage is that I am on a low rate until 2028. One bad thing, in three years the payments would go up to £600 on today's market rates! I am waiting for that moment to use my 6 months' interest only via the mortgage charter. 

My property is pretty modest. I could downsize in a sense of potentially moving to much a cheaper part of the country (I'm SE now), or sell up and rent, but rent around here is £1K+ a month for a 1 bed, so in the long run I'd be much worse off. A charge on my property is palatable, but holding on to it is my number one goal. 

I do have an extremely modest DB pension, but I don't think it ill be worthwhile looking into early payment through ill health. My conditions are not currently life restricting, so it wouldn't be a game changer. 

Applying for PIP is definitely a consideration, I was waiting on what the DWP determines. I think I should be in the support group, but then probably most ESA applicants do! Although there is no direct connection, I feel like if I was placed in the support group it would help with a PIP application. I am also awaiting a formal diagnosis for MH (referred by GP, he says it's a long wait), so will await that first. 

I do hope returning to work is a possibility, but I have reached the end of the road as far as the NHS goes it appears, it has been identified that congenital issues underlay my issues, and they've only started radically impacting my life through ageing. Basically I was discharged by the consultant, he (and I) was happy they ruled out cancer but there's no way to reverse or ameliorate my symptoms, seemingly. 

Ivor_Problemo

I've done some digging and had three soft checks for 'money laundering' on my credit report, this month. Interestingly not from the bank in question here. But for one of those banks I did get an email about BT offers, and in my actual account they didn't exist. Earlier in the month they did exist, but seemingly withdrawn even though I was still being emailed about the promotion.

The same thing happened today, emailed about using a promo offer before the end of November, but when I log in, the offer doesn't exist! I've never had that before on any account, now two different (unconnected) accounts, seems unlikely to be coincidental. 

I am very tempted to switch away from the bank, close the savings accounts I have with them, leaving the dd for the cc in place, deleting the app and seeing what happens. I've had no comms about 'confirming my details' outside of the app. I'm hoping it relates to the OD facility and not the CC.